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House price rises and subsequent financial stability concerns continue to worry the Reserve Bank which kept its official cash rate unchanged at 2.25% on Thursday.
In its Monetary Policy Statement, the bank noted demand is outstripping supply in the Auckland housing market and that house-price inflation is likely to persist in the near-term as a result.
Combined with increases in house price inflation outside of Auckland, the Reserve Bank believes the situation will continue to warrant close attention.
Housing is going to become a major election issue and the issue will continue to be confused between people being unable to afford their own home, or find a suitable property to rent, and the provision of social housing.
No amount of explaining by the Government is going to undo the confusion and it had best start now solving its major policy issue.
The Reserve Bank has an objective to return and keep inflation between its target mid-point of between 1% and 2%.
Inflation is now 0.4%, despite the best efforts of governor Graeme Wheeler to stimulate growth - and inflation - by keeping interest rates low.
The value of the New Zealand dollar has a significant role to play in all of this.
After the announcement by Mr Wheeler the OCR will be unchanged, at least until the next review in August, the kiwi rose against the Australian and US currencies.
Clearly, the Reserve Bank is on the back foot by being unable to influence the currency in a way it finds suitable.
The Reserve Bank would like the dollar to do more of the work of getting inflation back to its target range.
The Reserve Bank is in a very difficult position of having to maintain neutrality while at the same time trying to solve a problem of immense proportions.
Higher house prices are feeding into the regions, and not too many people are going to complain about their house values rising.
Extra value encourages New Zealanders to borrow more from the banks for discretional spending on renovations or going upmarket, buying large appliances or a new car.
Those on the fringes of the housing market are being left out as they struggle to get on the property ladder.
The heart of the Reserve Bank's problems are encapsulated in two scenarios to the outlook it considers most likely.
The first is if the currency is higher than the central bank's estimate which, absent any other policy responses, will need a lower OCR than projected.
The second will be if house price inflation remains elevated, needing higher interest rates without other policies being imposed, including a government response.
Some of the Reserve Bank's problems may be solved in a different way with Westpac and ANZ announcing they are overhauling their home loan applications that rely on overseas income.
Westpac will no longer lend to non-resident borrowers with overseas income and ANZ says a maximum loan-to-value ratio of 70% will be applied and will not be lent on investment properties.
No interest-only mortgages will be issued and boarder income will not be taken on board.
Banks in Australia have in some cases stopped lending to non-residents and temporary visa holders because of concern about the risks involved.
The New Zealand banks may already think the Auckland housing bubble is about to burst.
There are so many variables ahead, the market is only putting a 50% chance of a cut in the OCR at the August meeting.
However, if all goes to plan, the central bank will cut once more to 2% and remain comfortable with inflation gradually lifting back towards 2% by late 2017, earlier than previously forecast.
The key information on which the Reserve Bank will base its decision will be consumer price index inflation, the official measure, due on July 18.